Risk management in small construction projects

Risks and other uncertainties can cause losses, which lead to increasing costs and time delays,both during the project and at the end. The need to prevent failures during the constructionprocess and other losses related to construction has been emphasised in various reports.Example consequences are failure costs in civil works which can be close to 8% of the totalbudget for projects – more than 60% of these are costs due to ‘self-inflicted’ uncertainty.However, this paper is focused on small sized construction projects (in the range 1-15 MSEK),which are dominant in the Swedish construction sector today. They account for 83% of the totalnumber of projects. The aim of this paper is to describe how risks and uncertainties are managed in small sizedconstruction projects. Some characteristics of these projects are presented, for example theirorganisation, financial size and type of contract undertaken. The paper identifies and describesthe ways in which risk analyses are performed on a number of small projects today and wherethe common risks are believed to lie. The study is based on interviews with personnel selectedfrom a number of construction companies. In order to be able to make improvements in theconstruction sector, a clear focus on uncertainties, which means both opportunities as well asrisks, is needed. Organisations working mainly on small projects, that wish to improve theirperformance, need systematic methods for managing risks. Small sized construction projects are found to be managed both intuitively, i.e. based onexperience and systematically, i.e. using methodologies for risk and uncertainty management.The systems are, however, developed with the intention of fitting all sizes of projects and notspecifically small sized projects. Some common risk sources in these projects are contractdocumentation and tight schedules, the client, individual planning and logistics, cost estimatesused to compile the tender, subcontractors, technical solutions, safety of third parties andweather.